Pareto Optimal Redistribution: A Public Good Approach

Kye Sik Lee

Public Finance = Finances publiques, 1986, vol. 41, issue 2, 200-217

Abstract: A general equilibrium model with the Lindahl mechanism and the minimum guaranteed income scheme which highlights the public-good nature of income distribution is presented via introduction of the CES utility function, the Atkinson index of equality, and condensed U.S. income data. The Pareto optimal tax structure is shown to be more progressive all in all, the stronger the degree of inequality aversion and the weaker the degree of substitutability between public and private goods. Most markedly, the optimal tax structure is identified as lump-sum/regressive with increasing progressivity/proportionality/degressitivity, depending on alternative degrees of substitutability.

Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:pfi:pubfin:v:41:y:1986:i:2:p:200-217

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